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seven pillars, the report ranks 62 countries from all over the world. Hong Kong SAR, United state and United Kingdom ranks the top 3 respectively whereas Tanzania, Nigeria and Venezuela rank the bottom 3 respectively.

Regionally, 14 Asian and pacific countries ranked on the top 62. Hong Kong SAR maintains the first according to the financial development index. Besides Singapore, Australia and japans ranks 4th, 5th and 7th respectively. This region is relatively done a remarkable work on financial sector development.

On the other hand, 25 Europe and North America countries ranked on the top 62. United state and United Kingdom ranked 2nd and 3rd respectively. Out of 25 countries 14 of them are on the top 20. Only few countries, Hungary, Greece, Romania and Ukraine are on the bottom of 62.

When considering Middle East and North Africa, 9 countries are on top 62. Kuwait, Israel and Bahrain ranked 21st, 24th and 25th respectively. Like Middle East and North Africa, Latin American countries are doing little on development of their financial sector. Only 8 counties are ranked on the top 62. Among this Chile, Brazil and panama ranked 29th, 32nd and 36th respectively. The rest of them are ranked above 40th.

Finally, when we come to sub Saharan Africa the problem becomes worst. According to 2012 finical development report only 5 countries get a rank. South Africa is a leading country from Africa and ranked 28th from the world followed by Kenya (54th), Ghana (56th), Tanzania (60th) and Nigeria (61st).

Even if Ethiopia is not mention in this report, the World Economic Forum’s Global Competitiveness Report 2011/2012, ranked Ethiopia 125 out of 142 countries with respect to financial-market development.

3.3. Importance of Financial Sector Development for Growth

Economists hold the view that the development of the financial sector is a crucial element for spurring economic growth. Through their role of allocation capital, monitoring managers, mobilizing savings and promoting technological changes among others, financial intermediaries play a significant role in economic growth.

According to the 2012 financial development report explanation, financial intermediation and financial markets contribute to economic growth and aggregate economic welfare. On the one hand, greater financial development leads to greater mobilization of savings and diverting to productive investment projects. This leads to the accumulation of capital which enhances economic growth. On the other hand, by allocating capital to the right investment projects and promoting sound corporate governance, financial development increases the rate of technological innovation and productivity growth, further enhancing economic growth and welfare.

King and Levine (1993) justifies that higher level of financial development are positively related with faster rates of economic growth, physical capital accumulation, and economic efficiency improvements. Besides higher level of financial developments are strongly associated with future rate of capital accumulation and future improvements in the efficiency with which economies employ capital.

Agbetsiafa (2004) examines relationship between financial development and economic development using data of sub-Saharan countries and he concludes that countries with better function of financial systems today